Visualize what the town will look like. You can simply draw where your "buildings" will be. Is the general store at the end of "Main Street"? Where's the jail? Also consider how big, how tall, and how many buildings the town will have.
Draw up blueprints. Because you will build only facades of buildings, i.e., just the front wall (and occasionally a side wall), you won't need an architect. But consider hiring professional help up front if you plan to build the set on your own. A contractor should be able to help you draw easy-to-follow plans for each facade. The contractor will also help you determine whether your design will pass city zoning codes -- and whether you'll need a permit to build your set.
Build your facades. Depending on the size of your set (model? half-scale? full-scale?) and the number of buildings/facades you're creating, the time to complete this task will vary. If you're building a full-scale set, it's best to hire a contractor or subcontract some of the work, so you can comply with any city codes that apply.
Paint your facades. Take extra time with this. Painting with a weathered and beaten look will give your set the air of reality. Visitors will sense that they are in a real, "lived-in" space, and not just a series of walls built to look like entire buildings.
Decorate your set. Windows should get real curtains (that look a little worn -- remember, you want the lived-in look!). Benches and chairs should be outside the saloon and jail, and tip some of them against the wall. The saloon should have swinging doors. And every cowboy set needs a hitching post and horse trough. These details will give your set life.